Executive Summary
In the landscape of private placement investments, Tri-Land Equity Investor Funds produces an innovative investment approach. This white paper explains the strategy employed by Tri-Land Properties, leveraging “Letters of Credit” or “Pledge Agreements” as a substitute for traditional cash investments. This method not only optimizes investment efficiency but also offers investors an avenue to diversify a stock or bond portfolio without liquidating existing assets.
Introduction
The conventional investment structure typically necessitates direct cash injections from investors, which can often lead to the liquidation of valuable assets or the incurrence of debt. Tri-Land Equity Investor Funds challenge this norm by introducing an investment mechanism that allows investors to pledge assets like bonds or stock portfolios as collateral. This approach allows Tri-Land Properties to facilitate the acquisition of grocery-anchored shopping centers, leveraging pooled resources from these non-cash investments, while, eliminating the need to sell the underlying securities for this investment.
Investment Mechanism
The fund’s investment strategy hinges on the utilization of “Letters of Credit” or “Pledge Agreements.” These instruments enable investors to pledge existing assets as collateral, rather than providing cash upfront. This collateral secures an acquisition line of credit, which the fund then employs to purchase its real estate assets.
Case Study 1: Joe’s Pledge Agreement Investment Journey (Hypothetical)
For example, consider the case of Joe, a prospective investor with a $1 million non-qualified TD Ameritrade account. Under the fund’s terms, provided in the Private Placement Memorandum, Joe can make a $500,000 investment via a pledge agreement, leveraging his account as collateral. This arrangement mandates a 1:2 coverage ratio to ensure sufficient coverage against market fluctuations, with a requirement to maintain a minimum account balance that supports a 1:1.2 coverage ratio throughout the investment tenure.
This approach negates the need for Joe to liquidate his portfolio or incur debt for investment purposes. Instead, Joe retains his market investments while also participating in the Tri-Land Equity Investor Fund, enabling dual avenues for return generation.
Financial Returns Case Study #1
The utilization of Joe’s pledge agreement towards the acquisition of a $10 million shopping center illustrates the financial benefits of this strategy. With an initial pledge of approximately $350,000, Joe stands to earn a significant return through a combination of a Commitment Fee and a Return on Equity Fee, potentially achieving an annualized return of around 12%. Assuming the property was syndicated in six months and Joe earned $21,000.
Case Study 2: A Family Office Letter of Credit Investment Journey (Actual)
In 2004, a Family Office made an investment of $2,000,000 using a Letter of Credit which they arranged through their banking relationship with Leaders Bank. This Letter of Credit was collateralized by the Family’s wealth which was not shared with Tri-Land Properties. These assets could have included stocks, bonds, money markets, CD’s, real estate, or potentially from a signature from the family alone.
Using the Letter of Credit allowed the Family Office to make a significant investment in Tri-Land Equity Investors LLC, while eliminating the need to utilize cash for this investment. Their Tri-Land Equity Investor LLC investment was made from 2004-2006, a two-year full-cycle investment. A complete copy of the investor reports are available Click Here.
Financial Returns Case study #2
For these calculations, it is assumed that the Letter of Credit, issued by Leaders Bank incurred a cost of 1.0% per year which is paid by the Family Office directly to Leaders Bank. During this investment period, Tri-Land Properties was able to purchase seven shopping centers and complete final syndications for each shopping center within the guidelines of the fund. Five separate distributions were made to the Family Office totaling $255,500 for the two-year investment. A full description of investment returns can be found in the investor reports link above.
Benefits of the Investment Strategy
Conclusion
Tri-Land Equity Investor Funds offer a unique investment opportunity that goes beyond traditional real estate investments. By allowing investors to leverage existing assets through Letters of Credit or Pledge Agreements, the fund opens new possibilities for portfolio diversification and wealth generation. This approach not only enhances investment flexibility but also aligns with the goals of investors seeking to maximize their returns without compromising their existing asset base. If you would like to learn more about this strategy, please contact RJ Johnson at Tri-Land Properties.
Disclosures
THIS IS NOT AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY SECURITIES.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THE EXAMPLE PROVIDED ARE FOR ILLUSTRATIVE PURPOSE ONLY.
An investment in the Units is speculative, illiquid and involves a high degree of risk including the entire loss of investment. There is no guarantee that investors will receive any return. There will be no public market for the Units. There is no guarantee that investors will receive any return. The Projects will be subject to the risks generally associated with the acquisition, ownership and operation of real estate including, without limitation, environmental concerns, competition, occupancy, easements and restrictions and other real estate related risks. The Company intends to use leverage to acquire the Projects. The Company is a newly formed entity with no history of operations, no experience managing or operating funds, and has limited capital. The Manager, the Company and their Affiliates will be subject to certain conflicts of interest. An investment in the Units involves certain tax risks. The Company will invest only in a limited number of shopping centers and retail properties and thus, will have limited asset class diversification and be subject to the same property-related and industry-related risks. The Company intends to rehabilitate and redevelop the Projects and there is no assurance that the rehabilitation and redevelopment of the Projects will result in projected occupancy levels and rental rates or an increase in the fair market value of the Projects. The Projects will be subject to various construction risks, including weather conditions, delays in construction schedules, cost overruns, work stoppages, shortages of building materials and the availability of materials and labor.